Mesa Airlines is ready to enter interisle battle

The Arizona carrier will begin flights in April

Mesa Airlines' top executive said it seems unlikely Hawaii can support four interisland carriers, but the Phoenix-based regional airline is moving ahead with plans to start interisland flights in April.

Jonathan Ornstein, chairman and chief executive of Mesa, said yesterday the carrier still plans to come to the state, joining Hawaiian Airlines, Aloha Airlines and Island Air, despite the fact that Aloha plans to emerge from bankruptcy later this month.

"I think it will be a very competitive market, and it clearly will be a difficult situation with four carriers in the market," Ornstein said. "I'm not sure it's sustainable."

In preparations for takeoff, Ornstein said, Mesa has:

» Signed a signatory agreement with Honolulu Airport to help underwrite any state revenue shortfalls.

» Selected a name, logo and paint scheme.

» Hired a public relations firm and advertising agency in Honolulu.

» Signed an agreement with Sabre to be the booking engine.

» Designed a Web site.

» Spent $250,000 for automated-ticket kiosks.

» Ordered $10 million worth of spare parts and tools for a maintenance facility in Hawaii.

» Started training this week for the airline's reservation office in Farmington, N.M.

"The checks are cut, the money's spent, so we're moving forward full speed ahead," Ornstein said.

He said Mesa plans to start flying with two or three Canadair Regional Jet 200s, which seat 50 passengers, then expand to six planes a couple of weeks later. Ornstein said Mesa is negotiating a transaction with one of its partners to free up 50-seat planes for use in Hawaii.

Scott Ishikawa, spokesman for the state Department of Transportation, said the DOT and the attorney general's office are reviewing the signatory agreement. He said about 20 carriers have such agreements, which are designed to make up for a revenue shortfall in case the state Airport Division does not make enough money for operations from its concessions and landing fees, among other things.

Mesa's ticket-counter space and gate assignments are still being negotiated, Ishikawa said.

Although the interisland market has been considered a tough place to make money by some airline officials, Ornstein said he has the opposite view.

"We have a difference of opinion with other carriers," he said. "I think interisland is very profitable and that trying to compete with all the major carriers like United, Delta and USAir is where guys lose money.

"So we're very happy to stick to the interisland business and do believe it can be profitable long term. We had some outside consultants look at it, and they tend to agree with us."

On Oct. 31, Mesa announced one-way fares as low as $43 from Honolulu to Kauai and Maui and $46.50 to Hilo and Kona on the Big Island. Ornstein said those prices have not changed and that he would announce later when customers can buy tickets. He said it is possible that Mesa's arrival could spark a fare war.

"They say price is the intersection of supply and demand," Ornstein said. "If there's more supply, I imagine that would lower the price. If anything else, (recent fare cuts by Hawaiian and Aloha) suggest that people from Hawaii are already benefiting from us."

Mesa, which has 5,000 employees, operates 182 aircraft serving 45 states plus Washington, D.C., Canada and Mexico. The airline operates as America West Express, Delta Connection, US Airways Express and United Express, as well as independently as Mesa Airlines.

There had been some speculation among Aloha employees that the airline's emergence from bankruptcy might keep Mesa out of Hawaii and that Mesa was hoping Aloha would fail.

"Absolutely not," Ornstein said. "I actually said I'd prefer Aloha to stay in business and get reorganized because if Aloha had liquidated, we could not react fast enough to fill that void and I'd view that as a negative for us. Another carrier might have been able to take advantage of the opportunity."

Ornstein said that Mesa, which had $302.8 million in cash, marketable securities and debt investments at the end of December, is in a strong financial position and, except for two months after Sept. 11, 2001, has never had furloughs or had its employees take pay cuts or benefits reductions.

"We offer security and job opportunity," he said. "We have upgraded pilots to captain positions in less than three years. At most regional carriers it takes 10 years. So when you look at compensation, they're very well compensated compared to others in the industry. The question you have to ask yourself is, Do you want to be a high-paid first officer making $40 an hour or a moderately paid captain making twice that?"

Most positions for Mesa's Hawaii operations will be filled by current Mesa employees because the company's labor agreement requires that Mesa employees get first choice, Ornstein said.

"We've gotten a very good response," he said. "About twice as many people are requesting those domiciles than the number of people we need."